CPB IG audit finds station’s digital syndication revenue can’t count as fundraising

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After auditors from CPB’s Office of the Inspector General recommended that digital licensing revenues be disqualified as nonfederal financial support for Twin Cities Public Television, the station’s president urged CPB to consider updating its grant policy.

The routine audit found that the St. Paul, Minn., station incorrectly claimed $270,354 as NFFS, a measure of financial performance that can increase a station’s annual CPB grant. CPB requires public TV stations to raise a minimum of $800,000 in private funds annually. Through its Community Service Grant program, CPB rewards stations that earn these revenues from a variety of non-federal sources. Total NFFS, as reported annually to CPB, boosts the incentive funding that is added to  each station’s base Community Service Grant.

The $270,354 noted in the audit is syndication revenue from 2014 and 2015 for Next Avenue, TPT’s website for older adults. TPT licenses Next Avenue content primarily to nonprofits, but some of its subscribers are for-profit organizations, President Jim Pagliarini said in an interview.

But digital licensing revenues fall outside CPB’s definition of  NFFS, which recognizes two categories, contributions and payments. Contributions include donations such as membership income, corporate and foundation grants and underwriting; payments include transactions in which the station receives cash for a service or product.

According to CPB rules, only payments from state and local governments or educational institutions are NFFS-eligible. Since licensing payments to TPT came from for-profit and non-educational nonprofits, they did not qualify as NFFS, the audit said. Pagliarini told Current that revenue came from LeadingAge, an association of nonprofit senior services, and the Retirement Living TV cable channel, a for-profit business.

TPT reported more than $41 million of NFFS revenue in 2014 and 2015, according to the report. The overstated NFFS accounted for less than 1 percent of that total.

The IG report recommended that CPB recover $10,239 in excess CSG payments made to TPT based on the overstatement. CPB management has 90 days to respond.

In a letter responding to the report, Pagliarini said TPT has adjusted its 2015 annual financial report to reclassify content syndication revenue as non-NFFS income, as the IG recommended. But he also said that CPB should reconsider NFFS guidelines around digital income “as the industry continues to shift toward digital media.”

“The mechanisms for funding our work are evolving in the digital space,” he wrote.

In TPT’s case, “the content syndication agreements provide an opportunity to further the distribution of quality, educational digital materials while allowing multiple organizations to contribute funds to financially support the development and distribution of new content.”

Digital content syndication and other potential support mechanisms “should be encouraged,” Pagliarini wrote, “as public broadcasters look for creative ways to find non-federal funding sources for the creation and maintenance of the next generation of sustainable public media.”

In July TPT began allowing public media stations to republish Next Avenue content in full on their websites for free. Previously, some 90 affiliates provided links to the content. Pagilarini said the audit’s findings did not figure into that decision.

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